Market Update: Monday, September 17, 2018

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Daily Insights

  • New LPL Market Signals Podcast. In case you missed it, listen to Senior Market Strategist Ryan Detrick and Equity Strategist & Portfolio Manager Jeffrey Buchbinder talk about pullbacks in emerging markets, the manufacturing sector’s continued strength, and other factors affecting the current economic cycle. Please join our discussion on social via #LPLMarketSignals.

  • Publication delay for weekly reports. Please know that we are prioritizing the safety of our team during Hurricane Florence developments. Accordingly, please be prepared for potential delayed posting of this week’s Weekly Market Commentary and Weekly Economic Commentary. We thank you for your understanding.

  • Stay tuned… In this week’s Weekly Economic Commentary, we update our proprietary Beige Book Barometer and provide analysis on Main Street’s view of the U.S. economy. In this week’s Weekly Market Commentary, we examine the historical impact of midterm elections on U.S. stocks, and make a case for what we could see from the S&P 500 Index after the upcoming election season.

  • Green week. The S&P 500 posted five straight days of gains last week after dropping every single day in the prior calendar week. U.S. stocks have been taking cues from global risk sentiment recently, moving in tandem with equities around the world amid emerging-market and trade developments. Global stocks climbed last week as Turkey took steps to control inflation and stabilize the lira, while U.S. trade officials expressed interest in arranging a new round of trade talks with China (though  headlines this morning suggest those talks may be scuttled).

  • China talks scuttled? U.S. stocks briefly declined on Friday after news broke that the U.S. will proceed on implementing a $200 billion round of tariffs on China. China reportedly may turn down the United States’ offer of trade talks if the White House goes ahead with the threatened tariffs. Should those tariffs go through-and that appears more likely than not-the total amount of Chinese goods subjected to tariffs would approach $270 billion. A potential 10% rate would bring the “cost” to $27 billion.

  • Back at 3%. The 10-year Treasury yield briefly climbed above 3% intraday on Friday, testing what has been a psychological level for the yield this year. The 10-year yield trended has trended higher after it jumped 7 basis points (0.07%) — the most on a jobs report day since January 2017 – on September 7, when the August jobs report showed average hourly earnings grew at their fastest pace of the cycle. Calming global conditions have also helped lift longer-term Treasury yields. We expect the 10-year yield to end 2018 between 2.75% and 3.25%*, so we don’t foresee longer-term yields climbing significantly higher over the next few months.

  • The week ahead. U.S. housing data is the highlight of this week’s slate of economic reports. Data on homebuilders’ sentiment in August are due out Tuesday, while data on weekly mortgage applications, August housing starts and August building permits are due out Wednesday and data on existing home sales are due out Thursday. These upcoming reports will be heavily scrutinized after several discouraging reports on housing were released last month. Real estate activity is especially telling at this point in the cycle, as it may reflect homebuyers’ concerns around interest rates and future economic health. Preliminary Markit Purchasing Managers’ Index readings for September will also be released for several regions, including the U.S., Japan and the Eurozone. The August reading of the Conference Board’s Leading Economic Index (LEI), an aggregate of ten leading economic indicators and a gauge we track in our Recession Watch Dashboard, will be released on Thursday. The Bank of Japan will also hold a monetary policy meeting this week, with a rate decision scheduled for Wednesday.

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Click Here for our detailed Weekly Economic Calendar

Monday

  • Empire Manufacturing (Sep)
  • Eurozone CPI (Aug)

Tuesday

Wednesday

Thursday

Friday

  • Eurozone Markit PMI (Preliminary, Sep)
  • Markit U.S. Manufacturing PMI (Preliminary, Sep)


IMPORTANT DISCLOSURES

*Additional descriptions and disclosures are available in the Midyear Outlook 2018: The Plot Thickens publication

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.

All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

All company names noted herein are for educational purposes only and not an indication of trading intent or a solitication of their products or services. LPL Financial doesn’t provide research on individual equities.

All performance referenced is historical and is no guarantee of future results.

This research material has been prepared by LPL Financial LLC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

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Index data obtained via FactSet

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